Bud Watson, CPA
Senior Wealth Management Advisor

The goal of tax planning is to reduce your overall tax bill, not just for this year, but to reduce your lifetime tax burden.

Tax planning doesn’t just happen when preparing your annual tax returns. Instead, it’s a year-round focus. For instance, a tax plan may suggest selling investments that are held at a loss before the end of the year. This would be done to create a deduction that will shelter profits from more successful investments. Effective tax planning can improve investment returns because taxes take a significant bite out of most investing profits.

The timing and amount of charitable giving is another part of tax planning, particularly with the increased standard deduction and the ability to “bunch” deductions using a variety of tax strategies. Contributions to tax-deferred retirement accounts like 401(k) plans also play a role. A tax plan will also consider the consequences of contributions to health savings accounts and 529 education plans.

Tax planning is a big part of retirement planning. Decisions about whether to invest in a tax-deferred traditional IRA or a Roth IRA are guided by estimates of the tax bracket that a retiree will occupy after leaving the workforce, as are decisions to convert a traditional IRA to a Roth IRA. Estate taxes and the use of trusts to transfer wealth also come under the purview of tax planning.

Not every financial advisor offers tax planning services, but some advisors can include it as an offering to manage your overall financial plan. Some of the tax planning services often offered include: